I pay myself in drawings and a shareholder salary at year end. How will a lender read that, and should I change it before I apply?

On shareholder salary vs drawings in NZ, here’s the short answer. A lender reads drawings as money leaving the company, not as your income. What counts is the shareholder salary, PAYE salary or dividends that show up in filed tax returns. If your salary is only set at year end, the lender sees last year’s figure plus a year of drawings it can’t match to anything. The fix is to file returns, reconcile the current account and, if it suits, move to a regular salary before you apply.

Mr hears this from company owners all the time, usually right after a lender has asked, “So what do you actually earn?” The owner knows exactly what they take home. It’s the paperwork that tells a different story.

Drawings, shareholder salary, PAYE salary: what’s the difference?

Most small New Zealand companies pay their owners in one of three ways, often mixed together:

How you’re paid	What happens during the year	Where it shows up	How a lender reads it
Drawings	You transfer money to yourself as you need it	Your shareholder current account	Money out, not income. Needs a salary or dividend behind it
Shareholder salary (no PAYE)	Usually nothing. The figure is set once the accounts are done	Box 40B of the company’s IR4 and Question 20 of your IR3	Real income, but only once filed, and often a year behind
Regular PAYE salary	Paid weekly, fortnightly or monthly with PAYE deducted	Payslips, payday filing, your myIR income summary	Easiest to verify, because it matches your bank statements

IRD’s shareholder current account page describes the usual pattern: owners take drawings for living costs before any salary, dividends or interest are worked out, and the balance “is often not known until after the end of the financial year.”

On PAYE, IRD’s Employer’s guide (IR335, September 2026) is specific for close companies. Deduct PAYE from regular salaries paid to shareholder-employees for pay periods of one month or less. Don’t deduct PAYE from irregular salary payments. Salaries with no PAYE go into the company’s IR4.

Mr says: Drawings are the cash. The shareholder salary is the label your accountant puts on that cash afterwards. A lender can only lend against the label once it’s on paper.

How does a lender read drawings vs a shareholder salary?

A lender wants to answer two questions: how much the business earns, and how much you personally earn. The way you pay yourself muddies both if the paperwork lags.

What the lender usually has in front of it:

• Bank statements showing regular transfers from the company account to yours. Without context, those look like cash draining out of the business, sometimes in odd amounts at odd times.
• The last filed IR3 and company financial statements, which carry the shareholder salary for that year.
• The balance sheet, which shows your current account. A debit balance means you owe the company money.

Where it goes wrong: say your drawings this year are running well above last year’s declared salary. The lender can’t count income that doesn’t exist on paper yet, so it uses the lower filed figure. Meanwhile the current account is heading into overdraft, which looks like you’re lending yourself money out of the company.

For a business-purpose loan this plays out a little differently. Unsecured options are typically $5,000 to $500,000 and are sized on turnover and bank statements, so the lender looks hard at what’s left in the company after you’ve paid yourself. Property-secured loans from $20,000 to $5,000,000 lean more on equity and a clear way out, but the lender still wants your income story to add up. Our page on how much a business can borrow explains both approaches.

Why can a year-end shareholder salary make me look income-poor?

Timing. IRD’s 2026 company tax return guide gives companies with a 31 March balance date until 7 July 2026 to file the IR4, or until 31 March 2027 if they have a tax agent with an extension of time.

So the shareholder salary for the year to 31 March 2026 might not be on paper until early 2027. If you apply in October 2026, the lender may only have your 2025 figures to go on. If the business has grown since then, you’ll look like you earn less than you do.

Two other rules from the same guide are worth knowing:

• The company can only claim a deduction for shareholder remuneration if it’s paid during the income year, or within the time allowed to file the return. Otherwise the deduction moves to the next year.
• If your current account is overdrawn, meaning you owe the company money, the IR4 records it as a debit balance. A lender reading the accounts will see it.

On the personal side, IRD’s 2026 individual return guide (IR3G) says a shareholder-employee salary with no PAYE goes at Question 20 of your IR3. Because no tax comes out during the year, a decent salary can also make you a provisional taxpayer. IRD’s provisional tax page says that applies if your last return left you with more than $5,000 to pay. Our page on provisional tax and loan applications covers what lenders make of that.

Not sure how your own paperwork would look to a lender? Mr’s funding readiness check takes a few minutes and flags the gaps. When you’re ready to talk it through, you can see where you stand with Mr. Asking won’t leave a mark on your credit file.

Should I change how I pay myself before I apply?

Sometimes yes, sometimes it’s not worth it. Mr’s rule of thumb: tidy the evidence first, and only change the method if you’ll be borrowing again.

Worth doing in almost every case:

1. Get the latest IR4 and IR3 filed. Tell your accountant you’re planning to borrow. It changes the urgency, and it turns this year’s real salary into a number a lender can use. Our page on whether you need tax returns filed explains why this matters so much.
2. Reconcile the shareholder current account. Know the balance to the dollar, and whether it’s in credit or overdrawn.
3. Ask for a short accountant’s letter confirming your expected shareholder salary for the current year and how any overdrawn balance will be cleared.
4. Smooth out the drawings. A regular transfer on the same day each month reads very differently from a scatter of top-ups.

Worth thinking about if you’ll borrow again, or soon:

• Switch some or all of your pay to a regular PAYE salary. Payslips, payday filing and a myIR income summary give a lender something it can check against your bank statements. It isn’t free, though. Payroll admin, PAYE timing and ACC earners’ levy all change, so get your accountant to run the numbers.
• Clear or reduce an overdrawn current account with a declared salary or dividend, so the balance sheet isn’t showing you owing the company a large amount.

Usually not worth it: changing everything a month before you apply. One or two payslips won’t outweigh two years of returns, and a sudden switch can look like dressing up the file.

Illustrative example: a Whangārei building company

This example is invented to show how the pieces fit together.

Two directors run a small building company in Whangārei. Each takes regular drawings through the year. Their accountant sets the shareholder salaries once the accounts are done, and the company has an agent’s extension, so the 2026 IR4 isn’t due until March 2027.

In October 2026 they want to fund a second ute and a larger job’s materials. The lender’s first look shows:

• bank statements with frequent transfers to both directors’ personal accounts;
• 2025 financial statements with shareholder salaries well below what they’re actually taking now;
• one director’s current account overdrawn at the last balance date.

On paper, the company looks thinner than it is and one director looks to owe it money.

The fix takes about six weeks. The accountant brings the 2026 accounts forward and files them, declares salaries that cover the drawings, and writes a one-page letter on the current-year position. The directors also put themselves on a monthly PAYE salary from November, so next time the evidence will build itself. With filed numbers in hand, the conversation with a lender is about the ute and the job, not about missing paperwork.

What are the most common mistakes?

• Assuming the lender can see what you take home. It can see transfers. It needs a filed salary to count them.
• Leaving the current account overdrawn without a plan. IRD treats an overdrawn account as the company lending to you, and lenders read it the same way.
• Declaring a low salary to keep tax down, then asking to borrow on a high income. The lender works from the declared figure.
• Mixing personal bills into the company account. It blurs both the business’s cash flow and your income. The documents lenders ask for are much easier to read when the two are kept apart.

If you’re still weighing up whether a company is right for you at all, see our page on whether you need a company to borrow.

Ask Mr when your numbers are lined up

How you pay yourself is a tax decision first. But it’s also the story a lender reads, and a tidy version of that story opens more doors. If you’re getting your returns filed and your current account in order, it’s a good moment to find out what’s possible, whether that’s a modest unsecured facility or a loan secured on property.

The enquiry takes about a minute, and there’s no credit check when you first get in touch, so your credit file isn’t touched just for asking. Your enquiry isn’t passed around a crowd of lenders, so your phone won’t light up with strangers. A real person reads what you’ve sent and calls you to talk it through.

One request: fill the form in accurately. Tell us how you pay yourself, roughly what your last declared salary was, whether your current account is overdrawn, and whether your latest returns are filed. Straight answers mean the first option we put in front of you is the one that fits.

Let’s get started →